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From Theory To Practice

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Managing a Winner: Core Position + Short Premium

From Theory To Practice

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When we have our normal, 45 DTE trades on, the management techniques we apply to our winners are a little more straightforward. We like to manage these winning trades at 25-50% of max profit. But, how should we go about managing a winning trade on something that is part of a core position that we indeed to maintain for some indefinite period of time? Today, we take a look at a core position that is short the market with short puts coming in against it. As the market moves our way (lower), we examine different scenarios for how we should consider adjusting our core position. What we see is the guide to our game plan is a thorough examination of price and time – specifically extrinsic value (or time value) and days-to-expiration (DTE).

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